EU investigates banks over trading in government bonds

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EIGHT banks are being targeted in a European Union probe that alleges traders colluded to acquire and trade euro government bonds, a month after the EU regulators implicated lenders in a sovereign-bond trading case.

The European Commission didn't identify the banks being investigated for "a collusive scheme that aimed at distorting competition" for trading sovereign bonds issued by eurozone governments from 2007 to 2012.

"Traders employed by the banks exchanged commercially sensitive information and coordinated on trading strategies" mainly via online chatrooms, the EU said.

The EU's competition chief, Margrethe Vestager, is moving her attention to possible collusion between banks in the estimated $9.4trn (€8.2trn) market for European government debt.

While the European Union's powerful antitrust arm often lags far behind financial authorities in the US and the UK in punishing collusion between traders, its fines can be hefty.

The euro government bond probe is the third EU investigation that may see large fines for banks.

The EU last month sent objections to Deutsche Bank, Credit Suisse and Credit Agricole over alleged dealing in secondary trading of supranational, sub-sovereign and agency bonds denominated in dollars. Credit Suisse was also targeted over an alleged foreign-exchange cartel last year that other banks are seeking to settle, which can reduce potential penalties.

Traders swapping information on trading positions and future Libor submissions led to banks racking up €1.49bn in antitrust fines in 2013.

EU probes don't always lead to fines. More than a dozen banks including Goldman Sachs and JPMorgan Chase escaped penalties in 2015 when the EU dropped a four-year investigation into suspicions they conspired to shut exchanges out of the credit-default swaps market.